How Much Must Small Cell Costs and Backhaul Drop?

Ask yourself how much you would be willing to pay for an Internet connection to a $100 appliance (router, for example). At the low end of that range, one is looking at consumer-grade Internet access connections.

But put yourself in the shoes of an executive of an Internet service provider looking at big networks of small cell access points, perhaps with per-site costs in excess of $3,000, just for equipment, and not including site rent costs.

Consider a single macrocell, where backhaul could cost $24,000 a month, supporting perhaps 160 Mbps to 500 Mbps of capacity per site. How much capacity might a small cell require?

On the assumption a small cell only makes sense in a high-traffic area, the answer might be that the small cell requires as much capacity as a macrocell, in some instances. In other cases, perhaps a small cell only has to support a fraction of total macrocell bandwidth.

The issue is that traditional access using T-1 equivalents does not work. Small cells are going to require Ethernet bandwidth, between perhaps 100 Mbps and a gigabit.

As a rough rule of thumb, assume a small cell requires cost parameters about an order of magnitude less than a macrocell, with backhaul costs likewise scaled about an order of magnitude. That implies a maximum small cell backhaul cost of about $2,400 a month.

Greg Weiner, Vertix co-founder, argues that small cell sites would have to drop to about $100 to $250 per location to drive mass adoption. Again, that suggests something on the order of magnitude drop in costs is needed.

On the other hand, the cost of business grade gigabit connection is dropping dramatically, in some markets. Connections supplied by cable TV companies with dense fiber deployment (think Comcast) are one reason for thinking backhaul costs will drop to levels enabling mass small cell networks.

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Gary Kim has been a communications industry analyst and journalist for more than 25 years, and currently works mostly as a content developer (marketing copy, white papers, applied research, conference and blog content).

He speaks often at industry events, has written one book and a half dozen major market studies and 14,000 articles.

His work is noted for its examination of business model issues, especially wireless and mobile.

He recently founded the Spectrum Futures conference for the Pacific Telecommunications Council.

He was cited as a global "Power Mobile Influencer" by Forbes; ranked second in the world for strategic coverage of the mobile business.

He is a member of Mensa, the international organization for people with IQs in the top 2 percent.